EconPapers    
Economics at your fingertips  
 

Exchange Rate Exposure and Firm Dynamics

Juliana Salomao and Liliana Varela ()

No 12654, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper develops a heterogeneous firm-dynamics model with endogenous currency debt composition to jointly study financing and investment decisions in developing economies. In our model, firms' foreign currency borrowing arises from a trade-off between exposure to currency risk and growth. We assess econometrically the pattern of foreign currency borrowing using firm-level census data on Hungary, calibrate the model and quantify its aggregate impact. Our counterfactual exercises show that foreign currency borrowing can lead to higher growth and that the efficiency of the banking sector to screen productive and capital-scarce firms is essential to reap up the benefits of this financing.

Keywords: currency mismatch; Firm Dynamics; foreign currency debt; uncovered interest rate parity (search for similar items in EconPapers)
JEL-codes: F30 F34 F36 (search for similar items in EconPapers)
Date: 2018-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12654 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Exchange Rate Exposure and Firm Dynamics (2018) Downloads
Working Paper: Exchange Rate Exposure and Firm Dynamics (2018) Downloads
Working Paper: Exchange Rate Exposure and Firm Dynamics (2018) Downloads
Working Paper: Exchange Rate Exposure and Firm Dynamics (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:12654

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=12654

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2019-09-03
Handle: RePEc:cpr:ceprdp:12654